Rules of Interpreting the Provisions of the Negotiable Instruments Act, 1881

Rules of Interpreting the Provisions of the Negotiable Instruments Act, 1881

In an important Judgment, the rules of interpreting provisions of N.I. Act, 1881 were explained. 

Law is well-settled that user of the verbs ‘may’ and ‘shall’ in a statute is not a sure index for determining whether such statute is mandatory or directory in character. The legislative intent has to be gathered looking into other provisions of the enactment, which can throw light to guide one towards a proper determination. Although the legislature is often found to use ‘may’, ‘shall’ or ‘must’ interchangeably, ordinarily ‘may’, having an element of discretion, is directory whereas ‘shall’ and ‘must’ are used in the sense of a mandatory provision. Also, while the general impression is that ‘may’ and ‘shall’ are intended to have their natural meaning, it is the duty of the court to gather the real intention of the legislature by carefully analysing the entire statute, the section and the phrase/expression under consideration. A provision appearing to be directory in form could be mandatory in substance. The substance, rather than the form, being relevant, ultimately it is a matter of construction of the statute in question that is decisive. It is also a well-accepted rule that interpretation must depend on the text and the context - the text representing the texture and the context giving it colour – and, that interpretation would be best, which makes the textual interpretation match the contextual. While wearing the glasses of the statute-maker, the enactment has to be looked at as a whole and it needs to be discovered what each section, each clause, each phrase and each word means and whether it is designed to fit into the scheme of the entire enactment. While no part of a statute and no word of a statute can be construed in isolation, statutes have to be construed so that every word has a place and everything is in its place.

Wearing the glasses of the statute-maker, one need to read the text as set in the context. What is most significant is that the legislature has used both the verbs ‘may’ and shall’ in sub-section (1) of Section 148, N.I. Act, but in different contexts. As one would read and understand the sub-section, what one would find is that the verb ‘may’, implies discretion; and, if intended to have its natural meaning, it would refer to the discretion left to the Appellate Court to determine as to whether such court should order any deposit to be made by the appellant or not pending hearing of the appeal against the conviction and sentence recorded by the trial court.

On the contrary, the verb ‘shall’ used in the same sentence and distanced from the verb ‘may’ by 8 (eight) words, typically implies an obligation or duty that is referable to the quantum of deposit, that is, the deposit, in any case, must not be less than 20% of the fine or compensation awarded by the trial court. What follows is that once the Appellate Court is satisfied that a deposit is indeed called for, in an appropriate case, such court’s power is in no way fettered to call upon the appellant to deposit more than 20% of the awarded compensation, but in no case can it be less than 20%. Interestingly, while the proviso to sub-section (1) and sub-section (2) of Section 148 use ‘shall’ in the relevant context, sub-section (3) again reverts to ‘may’ and its proviso to ‘shall’. User of the verbs ‘may’ and ‘shall’ in different contexts in the same section is clearly suggestive of the legislative intent to mean what it said.

There could arise a case before the Appellate Court where such court is capable of forming an opinion, even in course of considering as to what would be the appropriate quantum of fine or compensation to be kept in deposit, that the impugned conviction and the consequent sentence recorded/imposed by the trial court is so wholly incorrect and erroneous that it is only a matter of time for the same to be set aside and that ordering a deposit would be unnecessarily burdensome for the appellant. Such firm opinion could be formed on a plain reading of the order, such as, the conviction might have been recorded and sentence imposed without adherence to the mandatory procedural requirements of the N.I. Act prior to/at the time lodging of the complaint by the complainant rendering the proceedings vitiated, or the trial court might have rejected admissible evidence from being led and/or relied on inadmissible evidence which was permitted to be led, or the trial court might have recorded an order of conviction which is its ipse dixit, without any assessment/analysis of the evidence and/or totally misappreciating the evidence on record, or the trial court might have passed an order failing to disclose application of mind and/or sufficient reasons thereby establishing the link between the appellant and the offence, alleged and found to be proved, or that the compensation awarded is so excessive and outrageous that it fails to meet the proportionality test : all that, which would evince an order to be in defiance of the applicable law and, thus, liable to be labelled as perverse. These instances, which are merely illustrative and not exhaustive, may not arise too frequently but its possibility cannot be completely ruled out. It would amount to a travesty of justice if exercise of discretion, which is permitted by the legislature and could indeed be called for in situations such as these pointed out above, or in any other appropriate situation, is not permitted to be exercised by the Appellate Court by a judicial interpretation of ‘may’ being read as ‘shall’ in sub-section (1) of Section 148 and the aggrieved appellant is compelled to make a deposit of minimum 20% of the fine or compensation awarded by the trial court, notwithstanding any opinion that the Appellate Court might have formed at the stage of ordering deposit as regards invalidity of the conviction and sentence under challenge on any valid ground. Reading ‘may’ as ‘may’ leads to the text matching the context and, therefore, it seems to be just and proper not to denude the Appellate Court of a limited discretion conferred by the legislature and that is, exercise of the power of not ordering deposit altogether albeit in a rare, fit and appropriate case which commends to the Appellate Court as exceptional. While there can be no gainsaying that normally the discretion of the Appellate Court should lean towards requiring a deposit to be made with the quantum of such deposit depending upon the factual situation in every individual case, more so because an order under challenge does not bear the mark of invalidity on its forehead, retention of the power of such court not to order any deposit in a given case (which in its view and for the recorded reasons is exceptional) and calling for exercise of the discretion to not order deposit, has to be conceded. If indeed the legislative intent were not to leave any discretion to the Appellate Court, there is little reason as to why the legislature did not also use ‘shall’ instead of ‘may’ in sub-section (1). Since the self-same section, read as a whole, reveals that ‘may’ has been used twice and ‘shall’ thrice, it must be presumed that the legislature was well and truly aware of the words used which form the skin of the language. Reading and understanding the words used by the legislature in the literal sense does not also result in manifest absurdity and hence tinkering with the same ought to be avoided at all costs. One would, therefore, read ‘may’ as ‘may’ and ‘shall’ as ‘shall’, wherever they are used in Section 148. This is because, the words mean what they say. 

For more details refer Muskan Enterprises v. State of Punjab [2024] GCtR 3463 (SC).